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iiiFederal spending and debt are out of control,and if America does not change course, thefuture will be dramatically worse. Now more thanever, it is crucial that Americans understand whatour nation’s spending, taxes, and debt mean forthem and their families. The Heritage Foundation’sFederal Budget in Pictures offers a unique toolto learn about the federal budget in a clear andcompelling way.These pictures reveal the urgent need torein in spending. The federal budget is on anunsustainable course, because Publicly Held DebtIs Set to Skyrocket (p. 30) despite Taxes SoaringPast Highest Level Ever (p. 24). Federal Spendingper Household Is Skyrocketing (p. 2), and FederalSpending Exceeds Federal Revenue by Morethan $1 Trillion (p. 3). If Congress fails to adoptthe transformational reforms necessary to cutspending and stabilize the debt, U.S. Debt Is onTrack to Fuel an Economic Crisis (p. 38).Runaway Spending, Not Inadequate Tax Revenue,Is Responsible for Future Deficits (p. 7). MedicareIs Adding to Federal Deficits Faster Than OtherGovernment Spending Programs (p. 44), and SocialSecurity Deficits Are Permanent and Growing (p.45). Meanwhile, Medicare and Other EntitlementsAre Crowding Out Spending on Defense (p. 8), a coreconstitutional function of government.Some suggest raising taxes to cover budgetdeficits. However, Balancing the Budget WithoutCutting Spending Would Cause Taxes to Skyrocket(p. 50) to the point where Hiking Taxes to Balancethe Budget Would Require Doubling Tax Rates (p. 51).Taxing the Wealthy to Balance the Budget Will NotWork (p. 52), as this would necessitate raising taxrates to mathematically impossible levels.About the Federal Budget in Pictures

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ivPresident Obama’s Budget Hikes Taxes by $2Trillion (p. 23) even though Increasing Tax RatesDoes Not Necessarily Lead to Higher Income TaxReceipts (p. 25). Higher taxes on working, saving,and investing would, however, discourage theproductive activities that enable the Americaneconomy to flourish and the American peopleto prosper. American businesses are alreadyhamstrung internationally, as the U.S. Has theHighest Corporate Tax Rate (p. 21).Bold, transformational reforms are neededto solve America’s spending and debt crises.The Heritage plan, Saving the American Dream,achieves this through spending, entitlement, andtax reforms. It reduces the size of government,encourages personal fiscal responsibility, andfosters economic growth. It balances the federalbudget in ten years—without raising taxes.The Federal Budget in Pictures will help allAmericans understand the severity of the nation’scurrent fiscal situation and appreciate the growingmagnitude of decisions that lawmakers mustconfront to fix the debt, cut spending, and restoreprosperity in America.

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vFEDERAL SPENDING Federal Spending per Household Is Skyrocketing.................................................................................................................................................................................................................................................2 Federal Spending Exceeds Federal Revenue by More than $1 Trillion...............................................................................................................................................................3 Federal Spending Grew Nearly 12 Times Faster than Median Income...............................................................................................................................................................4 What if Families Handled Finances Like the Federal Government Does?................................................................................................................................................. 5 Mandatory Spending Has Increased Nearly Six Times Faster than Discretionary Spending.....................................................................6 Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits...............................................................................................7 Medicare and Other Entitlements Are Crowding Out Spending on Defense......................................................................................................................................8 National Defense Spending Would Plummet Under Obama’s Budget.................................................................................................................................................................9 Budget Control Act Sequestration Would Hit Defense Hardest.....................................................................................................................................................................................10 Obama Budget Would Make Defense the Lowest Budget Priority...............................................................................................................................................................................11 More than Half of All Federal Spending Will Be on Entitlement Programs in 2012.......................................................................................................12 Total Welfare Spending Is Rising Despite Attempts at Reform.........................................................................................................................................................................................13 More than 70 Percent of Federal Spending Goes to Dependence Programs.....................................................................................................................................14 Cut Spending, Fix the Debt, and Restore Prosperity................................................................................................................................................................................................................................... 15FEDERAL REVENUE Taxes per Household Have Risen Dramatically.......................................................................................................................................................................................................................................................18Table of Contents

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vii Interest on the Debt Exceeds Spending for Many Programs.................................................................................................................................................................................................. 37 U.S. Debt on Track to Fuel Economic Crisis.....................................................................................................................................................................................................................................................................38 Debt to Grow Unless Government Spending Is Reduced................................................................................................................................................................................................................39ENTITLEMENTS Entitlement Spending Will Nearly Double by 2050.....................................................................................................................................................................................................................................42 Tax Revenues Devoured By Medicare, Medicaid, and Social Security in 2045...........................................................................................................................43 Medicare Adding to Federal Deficits Faster than Other Government Spending Programs.........................................................................44 Social Security Deficits are Permanent and Growing................................................................................................................................................................................................................................45 Without Entitlement Reform, Federal Spending Will Exceed 40 Percent of the Economy by 2050....................................46 Discretionary Spending Cuts Alone Will Not Balance the Budget............................................................................................................................................................................47 Even Eliminating Defense Spending Completely Would Not Balance the Budget...........................................................................................................48 Letting Tax Cuts Expire Will Not Balance the Budget............................................................................................................................................................................................................................49 Balancing the Budget Without Cutting Spending Would Cause Taxes to Skyrocket....................................................................................................50 Hiking Taxes to Balance the Budget Would Require Doubling Tax Rates................................................................................................................................................ 51 Taxing the Wealthy to Balance the Budget Will Not Work...........................................................................................................................................................................................................52 Government Policy Reform Needed to Keep Spending Low and End Deficits Without Raising Taxes..........................53

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Federal SpendingSpending is at record levels and is stillgrowing, threatening economic freedom.

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54The charts in this publication are based primarily on data available as of February 2012 from theOffice of Management and Budget (OMB) and the Congressional Budget Office (CBO). The chartsusing OMB data display the historical growth of federal spending, revenue, and debt to 2011, while thecharts using CBO data show both historical and projected growth from as early as 1940 to as far as 2085.Projections based on OMB data are taken from the President’s budget for fiscal year 2013.The charts show annual data except where calculations are made for Administration averages. Debtlimit data are based on the limit in effect at the end of the calendar year. All spending and revenue dataare based on the federal fiscal year. Prior to 1976, the fiscal year was from July 1 to June 30. That year, thecurrent format of October 1 to September 30 was implemented. In the charts, the transition is omitted forsimplicity.Charts designating presidential Administrations begin with the fiscal year in which the Administrationpresented its first budget. In the case of 2009—an atypical year in which much was spent before theAdministration’s first fiscal year budget (FY 2010), all revenue and spending up to the CBO January 2009“Budget and Economic Outlook” is attributed to President George W. Bush. All revenue and spendingthereafter is attributed to President Obama.There are different ways to calculate average historic levels of revenue, spending, and debt. Suchaverages vary due to the time periods covered. In this publication, these averages span 50 years (1959–2008), encompassing post–World War II and pre–Great Recession years.Technical Notes

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56The Entitlements Initiative is one of 10 Transformational Initiatives making up The Heritage Founda-tion’s Leadership for America campaign. For more products and information related to this initiative or tolearn more about the Leadership for America campaign, please visit heritage.org.The Heritage Foundation is a research and educational institution—a think tank—whose mission is toformulate and promote conservative public policies based on the principles of free enterprise, limited gov-ernment, individual freedom, traditional American values, and a strong national defense.Our vision is to build an America where freedom, opportunity, prosperity, and civil society flourish. Asconservatives, we believe the values and ideas that motivated our Founding Fathers are worth conserving.As policy entrepreneurs, we believe the most effective solutions are consistent with those ideas and values.

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The Federal Budget in Pictures is available online withenhanced features. Go to heritage.org/FederalBudget• Embed or download the entire book or individualcharts for blogs and presentations• Sign up to receive Budget Sense, a bi-weekly e-mailthat delivers the latest on spending, taxes, and debtdirectly to your inbox• Share charts with your social networks throughFacebook, Twitter, and more• View the interactive charts• Read in-depth research on taxes, spending, debt,and the budgetHeritage.org/FederalBudgetThe Federal Budget in Pictures Online214 Massachusetts Avenue, NEWashington, DC 20002-4999(202) 546-4400heritage.org